Fed’s Harker says he’s ready to start the process of cutting rates

• Wants a gradual and methodical course of rates cuts
• Current monetary policy is in a good place, not overly restrictive
• End of easing cycle may put Fed funds around 3%
• Business contacts favor a predictable pace of cutting
• Fed rate cuts will likely ease housing sector pressure
• Unemployment likely to rise to just below 5%
• Continues to watch commercial real estate sectors
• Job market has now mostly normalized

The bolded is the real crux of the argument for me. ‘Around 3%’ is a broad range but it’s a critical input to be thinking about for USD, especially as compared to other central banks who will go to 2% or lower. Then the question is: If the US economy slows to 1% with 1.9% inflation, will the Fed go below 3%?

This article was written by Adam Button at www.forexlive.com.